Property Tax Appeals

Ever feel like your property taxes are out of control? You’re not alone. Many Americans are complaining about rising assessment values, and the issue seems likely to only be getting worse. Local governments are feeling the pinch from increased expenses like retirement benefits for county workers and increasing property taxes is often the default solution.

While there’s no way to completely get out of paying your property taxes, there are ways to ensure you’re not paying more than you need to.

According to the National Taxpayers Union (a non-partisan tax advocacy group), somewhere between 30 – 60% of taxable properties are over-assessed – resulting in higher tax bills than required. Unfortunately, the lower and middle-class are the ones most often affected.

While never guaranteed, appealing an assessment can often lead to significant tax savings. Yet only around 5% of taxpayers take advantage of this opportunity. Contrary to what many assume, the process isn’t really all that difficult. The key is in having a well-organized case when filing your appeal.

UNDERSTANDING THE PROCESS

First off, you need to understand how local property tax appraisals are determined before filing your claim. For example, some localities complete new assessments annually while others do so only every few years. In California, when real property is sold or transferred to another, generally speaking, it gets a new base year value, i.e., the price for which it sold. After that, this base year value can only increase if inflation increases but the change in value is limited to 2% annually. In effect, your property taxes cannot increase more than 2% each year unless there is a change of ownership.

In other states, the local Assessor determines market (assessed) value for homes in their area. Most Assessors use what is known as an assessment ratio to determine value. These ratios are based on the market value of a home multiplied by a predetermined fractional amount. For example, a home valued at $200K – multiplied by a factor of .85% – would receive a $170K assessment value.

In rural or affluent areas – where similar comps may be limited – assessments are often based on the replacement cost of a home minus perceived differences in land value. Understanding these formulas can aid in determining whether or not your home has been assessed correctly.

VERIFY YOUR PROPERTY CARD

Taxing authorities base much of your home’s assessed value off the information they already have on file. This data is often referred to as your worksheet or property card. Some of the elements included on your property report are: lot size, square footage, number of bedrooms, bathrooms, cost or last sale’s price, etc.

It’s important to make sure the numbers in your file are correct and up-to-date. Even seemingly minor errors can have a major impact on your tax liability. For example, a lot size listed as 3 vs .3 acres. Or a 1500 square foot home reported as a 2500 square foot residence. It may seem silly, but one decimal place can make an enormous difference when it comes to property taxes.

For blatant errors on such basic facts, simply presenting the correct information (blueprints, plot plans, etc.) may be enough to resolve the issue informally; thereby avoiding the need for a full-blown appeal all together.

DO YOUR OWN RESEARCH

In addition to reviewing your own file, you should research the data on similar properties in your area. Many online realty websites can provide information on nearby properties and recent sales. One example is zillow.com. Even better, ask a local realtor to compile a list of comps on your behalf. A large number will do so for free in hopes of a referral later down the road.

The key here is to make sure you’re comparing apples to apples. Your list should include properties that match closely in terms of age, size, square footage, construction materials and location. If you can find a handful that are valued lower than your own, you may have grounds for an appeal. In California, this will not be the case for most homeowners because of Proposition 13 and the rules regarding base year value. Notwithstanding, if you find an error has been made in establishing your base year value or the assessed value, an appeal may be in your best interests.

Even if you don’t locate any good matches there’s still hope. In addition to basic data, assessors take into account things like structure or property damage, poor drainage or adjacent nuisances (like water or power substations). Be sure to include good photos, repair estimates and plot plans to support your claim.

LOOK FOR EXEMPTIONS

It pays to look into any possible exemptions you may qualify for as well. Many states recognize homestead exemptions and offer property tax reductions for owning your home. Unfortunately, California is not one of them (although homesteading does provide other protections in terms of bankruptcy liability).

Other exemptions include breaks for seniors, veterans and those that are disabled. The rules and benefit amounts for each program vary. Your best bet is to speak with a local Tax Assessor’s Office to learn what exemptions apply in your area.

In California, the State Controller’s Property Tax Postponement Program returned in 2016 after being suspended by the Legislature in 2009. The program allows homeowners who are seniors, are blind, or have a disability to defer current-year property taxes on their principal residence if they meet certain criteria including 40 percent equity in the home and an annual household income of $35,500 or less.

California also has a homeowner’s exemption amounting to $70,000 for a principal residence occupied by the homeowner. Unfortunately, the tax savings is a paltry $70 annually.

FILE YOUR APPEAL

Once you’ve collected your evidence, it’s time to file an appeal. Carefully review your assessment notice as it has specific instructions regarding how the local process works. Be sure to follow these guidelines to make the proceedings go as smoothly as possible.

On the date of your hearing, remember to bring evidence needed to support your claim (photos, repair estimates, blueprints, comps, etc.) and keep copies of any paperwork you submit.

As a side note, go into your hearing with a good attitude. Be polite, state your case and let events unfold on their own. Most assessment offices are inundated with appeal requests, and those who are the most prepared (and easy to work with) are frequently the ones who catch a break.

Even if you don’t win your local case, you may be able to file an appeal in Superior Court. Whatever happens, pay your taxes on time to avoid possible penalties or fines. Credits can always be applied to your account afterwards or brought forward on next year’s bill.

A question often asked is whether or not to hire a professional to assist you with your appeal. The jury is out on this one (pun intended), as the cost of doing so often negates the possible tax savings. Besides, some say that going it alone is better anyway (in terms of eliciting sympathy and building rapport with the Assessment Appeals Board).

CONCLUSION

In the end, you can only do so much to reduce your property tax liability. But even small reductions in value can make a big difference in the long run. Keeping your tax bill as low as possible now will reduce the compounding effect of rising rates later on.

Besides, statistics show that at least 30% of all appeals are successful in one form or another. This is especially true of homeowners that come prepared and are ready to negotiate. Being out nothing but time and a little research on your part, you owe it to your bank account to at least give it a shot.

We consult on a broad range of California state and local tax issues, including franchise tax, income tax, property tax, sales and use tax, payroll tax, fuel tax, and business license tax matters, as well as California New Employee Credits and California Competes Credits.